MBA Research

Trend #29: Risk of Loss

Business Trend

Businesses today are increasingly exposed to a wide range of risks which, if realized, can result in significant harm to their reputations and their bottom lines. This month’s trend focuses on the risk of loss and the damages that can be incurred, and sometimes amplified, through social media channels.

Workplace Implications 

Heightened competition, an increased regulatory environment, lean operations, and information availability are all contributing to the high risk environment that is business today. Natural disasters, equipment outages, failed ventures or partnerships, and data breeches can all cause ripples throughout supply chains. Often, the risk is realized through the actions of a single employee or customer. The rapid spread of information on social media, promulgated by the wide use of hand-held devices used for recording and sharing, creates a further hazard which companies must face.

Mismanagement of social media outlets by employees can jeopardize a company brand and undermine carefully constructed reputations. Last year, a restaurant chain suffered a public-relations setback at the hands of an employee who posted personal information about a customer on Facebook. The company made matters worse by deleting negative comments and blocking users from its Facebook page as the story spread. Customers and commenters quickly became outraged. 

Health Insurance Portability and Accountability Act (HIPAA) violations offer opportunities for major damage to individuals and healthcare organizations. A healthcare provider acted quickly to fire an employee who posted a picture on Facebook of the backside of a patient receiving treatment in the emergency room. Employees who commented on or “liked” the post were also reportedly fired. Subsequently, the healthcare provider was sued by a physician who commented on the post but felt she was wrongfully terminated. 

Even educational institutions are not immune to the perils of employee missteps. A university was embroiled in racial controversy this past fall, a professor was filmed trying to physically force a photographer from a demonstration scene.  She now faces potential assault charges. Footage of the incident captured live, quickly went viral, and both the professor and the university were quickly tried and condemned by the public based on footage that lasted just over a minute. 

Businesses need to fully evaluate and understand the risk of loss they face from within and outside their ranks. Written policies and procedures and ongoing training that specifically address appropriate employee communication (i.e., who can share what with whom) should be mandated. A comprehensive risk management plan, which includes prevention measures, provisions for whistleblowers, and response procedures is vital.

In addition, businesses need to make sure employees understand that they represent the company brand even when they are posting on their own personal social media profiles. Sometimes, the best examples of judicious behavior in this area can come from company executives, as they post on their own personal social profiles, in ways that are mindful of the company brand.

Classroom Implications 

Students need to fully understand how to evaluate current and emerging risk factors in business. Looking at real-life examples of business losses will help the learning process. Students should brainstorm about strategies that could have prevented losses in the examples presented and discuss mitigation approaches. Students need to understand that when they work for a company, they become the company’s brand ambassadors. Actions they take in their personal and work lives reflects on the companies for which they work. In addition, instructors need to help students realize how violations of personal information, especially from a healthcare perspective, can affect victims. Allowing students to hear first-hand from affected individuals could have a lasting impact on students and help sensitize the future workforce to the importance of these issues.